Cheapest method to overpay Tesco loan?

john-zxr

Hi,

I am looking of taking a loan for around £7k, Tesco offers one of the most competitve rates for this figure, however, I will be making a large repayment on the loan (to settle it) in about 10 months, so early repayment charges will apply.

So my question is this. The Tesco site says that early repayment penalties are equialent to 2 months payments. So doing the maths on that we get:

£7000 over 12 montly repayments = 609.52 per month. Therefore the early repayment fee is £1219.04

If I take the loan over 10 years, but still repay in 10 months then I get:

£7000 over 120 monthly repayments = £61.12 per month. Therefore the early repayment fee is £121.24

Either way I pay the loan back in under a year, but the penalty fee is way less on the second option.

Or am I missing something critical here?

Thanks

John

Tixy

Its up to 2 months interest if your settle early as far as I can see on the tesco website, not 2 months repayments

Early Settlement You will be charged up to two months interest if you choose to settle your Tesco Personal Loan early.

john-zxr

ok, that makes more sense. Thanks

shop-to-drop

Have you tried Zopa? Great if you want to overpay and pay off early as no penalties. Give it a try if you don't get a good enough rate straight away try a few times over the next few days as the rate varies that's what I did and when I got the rate I was after snapped it up. The Zopa rate I got on a 3 year loan was as good as the Tesco 5 year rate was at that time suited me as I wanted to overpay anyway. Just meant the payments stretched us the first couple of months until we had a lump sum (work bonus) and then were able to overpay and bring the payments right down.